There is no reason to exclude a large chunk of income earned by people of about Rs 3.67 lakh crore in the last year out of the tax net, said Finance Secretary Hasmukh Adhia.
The Finance Minister Arun Jaitley in Union Budget 2018 introduced a long-term capital gains tax of 10 percent if the gains exceed Rs 100,000 without allowing the benefit of indexation. However, all gains till 31st January 2018 will be grandfathered and short term capital gains remains unchanged at 15 percent.
Talking about the rationale behind this move, Finance Secretary, Hasmukh Adhia said it was done with an attempt to discourage investment only in one type of asset class vis-à-vis other asset classes.
He said, when the long-term capital gain tax (LTCG) was removed from country in 2004-05, the circumstances were different, we wanted to encourage investments into capital markets and there was also an issue of foreign companies not paying any tax. However, now all these measures of keeping it outside the tax net has paid off and the tax market is buoyant now. Even with 10 percent tax the gains from equity will be attractive for market participants, he added.
Now, there is no reason to exclude a large chunk of income earned by people of about Rs 3.67 lakh crore in the last year out of the tax net, he said.
So, without hitting the market too badly, we have done it in a soft manner and the market has received it very well, said Adhia.
In the Budget 2018, the Finance Minister Arun Jaitley also revised the fiscal deficit for FY18 would be 3.5 percent of the gross domestic product (GDP) indicating a deviation from the path of fiscal consolidation because of a spillover impact of the new indirect tax system—Goods and Services Tax and that for FY19 at 3.3 percent of GDP.Talking about revised fiscal deficit targets, Adhia said the government will be able to reasonably meet with the 3.3% target for FY19. However, the government wants to be cautious in budgeting exercise – it does not want to be over estimate revenues and underestimate expenditure.
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